Cisco

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CEO John Chambers must be in great shape after all the exercising he's been doing.

In his latest workout, the closely watched tech executive cashed out $16 million worth of stock options in a preplanned stock sale. The maneuver brings Chambers' take over the last year to a cool $73 million.

A

Securities and Exchange Commission

filing shows that Chambers sold 825,912 shares Tuesday at an average of $19.36 a share. The sales came after Chambers paid $5.55 a share for the stock. He netted about $11 million in the deal.

On Wednesday, Cisco shares rose fractionally after the company said it would acquire its San Jose, Calif., neighbor Jahi Networks for $16 million in cash.

To be sure, it's not like Chambers is dumping his Cisco holdings. As of last year's proxy statement, he held options on some 28 million shares. Chambers also holds 1.8 million shares outright. At current prices the entire slug is valued just shy of $600 million.

On the other hand, Tuesday's sale came just a week after Cisco offered its latest lukewarm assessment of the information technology marketplace. Shares in the company dropped 7% last Wednesday after Cisco warned that current-quarter sales

wouldn't rise as fast as Wall Street had hoped.

More to the point, Chambers has been raking in the proceeds of stock option exercises even as Cisco shareholders suffer through another dismal year. The company has posted modest financial and operational progress, but shares have lost a third of their value after an early-year run-up. Meanwhile, Cisco has been pouring much of its abundant cash into an expansive stock buyback program that some critics charge

benefits executives at the expense of public shareholders.

Skeptics of Chambers' selling will note that this round of options wasn't exactly forcing his hand with the threat of imminent expiration. They were due to expire on July 29, 2005. Meanwhile, Chambers this summer

resumed collecting a cash salary and bonus after three years of doing without. Of course, he scored 16 million options during that run.

Chambers set up his so-called 10b5-1 preplanned selling program last quarter, after a previous Cisco earnings disappointment. The plan, which took effect the

last time he exercised options, will allow Chambers to sell some $325 million worth of stock over four years.

Not surprisingly, Chambers has been a vocal opponent of expensing stock options, an accounting reform movement that has been hung up in Washington for several months. Expensing advocates say companies' earnings statements should have to reflect the cost of options issuance, while foes claim that number isn't based in economic reality.

Not Pumped
Cisco shares still soft

Either way, a move to expense options would punish Cisco's profits, making its stock look pricier and perhaps less attractive to investors.

According to the company's most recent quarterly filings, options expensing would have slashed fiscal 2004 earnings by more than $1 billion, or 28%.

On Wednesday, Cisco rose a dime to $19.48.